Budget offers jobs, bank investment and innovation for social enterprises

An extension of the Future Jobs Fund until March 2012, a consultation that could force banks to invest in community lenders and more social impact bond pilots were announced in the budget.

In his speech chancellor of the exchequer Alistair Darling said that savings in payments on unemployment benefits justified the extension of the £1bn Future Jobs Fund (FJF) which helps businesses provide six month placements in socially useful jobs for those aged 18-24, and those in unemployment hot spots, who have been out of work for six months or more.

The FJF is being used by some social enterprises to grow their businesses with a view to taking people on full time.

Darling said: ‘The recovery is in its infancy and we should not withdraw support too soon so that is why we are using the money saved in claimants to extend this guarantee [of a job or training] to young people to March 2012.’

FJF was due to have finished in March 2011. There is no detail of how much money will be available specifically for the fund but the government’s extension of the guarantee – which includes a number of measures and not just the FJF – will cost the Treasury £450m.

The budget detail also includes plans to force banks into disclosing who and in what communities they lend to – a step that has been long called for by campaigners who believe banks systematically exclude the poorest from their services. This will be supported with a consultation on how banks can better support community lenders.

Community Development Finance Association CEO Bernie Morgan called the consultation on how banks can better support her members – and the fact this may include the introduction of a levy – a ‘major win’.

Morgan said: ‘This could be a major win for people on the lowest incomes, as well as the community development finance institutions (CDFIs) which provide them with financial services when the banks can't help. We have been calling for increased support for CDFIs from banks for many years, most recently through the Better Banking Coalition, and this is potentially a major breakthrough for us.

‘But it is not enough simply to consult on this measure – it has to be enshrined in government policy.’

Development Trusts Association national director Steve Wyler, who is a member of the Better Banking Coalition, said the need for banks to disclose who they lend to was an ‘absolutely essential first step’ to seeing whether the anecdotal evidence about ‘red lining’, where certain people are written off as customers, was true. He also said it was a first step towards the introduction of legislation similar to the US Community Reinvestment Act.

‘Our view at the Better Banking Coalition is that it is inexcusable, in the current circumstances, not to act on banks and learn the lessons from the US and elsewhere,’ said Wyler.

The budget detail also revealed that more Social Impact Bonds (SIB) are to be piloted. In particular, the Communities and Local Government department will work with Leeds City Council and Leeds NHS to use an SIB to reduce health and social care costs. Further work is happening with Bradford Metropolitan District Council.

The government’s £75m support for a social investment wholesale bank was confirmed and it was announced that the bank will only operate as a ‘fund for funds’ which will invest in other social investors not directly into third sector organisations.

The Treasury notes say the government will be a ‘minority investor’ and it will ‘appoint a fund manager following an open competition, selecting on the basis of their ability to leverage in private capital for social investment’.

The government will also be conducting a broad review of public funding for social investment as part of the next Spending Review.

Green bank door closed to social enterprise

However, one of the government’s biggest investment announcements in the Budget, the £2bn Green Investment Bank which is to be funded half by government and half by the private sector, looks not to be available to social enterprises and community renewables schemes.

This investment is to be targeted at ‘large, complex low-carbon infrastructure projects’, which would appear to exclude most community-based green schemes.

Wyler called this a ‘huge opportunity missed’ in an ‘important, new’ source of investment.

‘Given that it’s not clear whether there will be an opportunity for community based social enterprises to get investment from the bank I would say there certainly needs to be.

‘There is a huge appetite among communities to impact on climate change,’ said Wyler.

Co-operatives UK general secretary Ed Mayo said: ‘We urge that the new bank is open to co-operative models of delivery and share ownership.’

Another of the Treasury’s big announcements is the new UK Finance for Growth (UKFG) company that will administer the Growth Capital Fund. This fund will provide finance between £2m and £10m to SMEs.

According to the budget notes UKFG is also meant to improve equity support schemes, through better co-ordination of existing government support, for SMEs working on low-carbon initiatives.

This fund currently stands at £200m, with the capital raised from various banks, but the government hopes the investment available will grow to £500m.

Other budget announcements likely to impact on social enterprises include:

• the government’s target to increase purchasing from SMEs by 15 per cent
• an agreement with the government controlled banks of Lloyds and RBS to lend £41bn to small businesses over the next 12 months
• small business rate relief in England for one year from October for those businesses in premises with rateable values up to £6,000.